How long is a banking day?

It is better to pick an exact date for sending waivers of conditional clauses when closing a real estate deal.

Most real estate deals are conditional for a few days upon the buyer either obtaining financing or being satisfied with the results of a home inspection. The condition clause typically states that if the condition is not waived by the end of the day, the deal is automatically cancelled. If the condition is waived in time, then the deal becomes firm and binding. The question then is, how long is a typical day, and does it change if it is referred to as a business day or banking day? If you are not clear, it can become very costly to figure out.

Here’s why:

Sheri-Lee Weslock agreed to sell her home in Burlington to Neil Sexton on March 30, 2008, for $647,500. The deal was conditional for four banking days on the buyer obtaining satisfactory financing. If the notice was not delivered, the deal would be cancelled. Mr. Sexton claimed that his real estate agent told him that the clause meant he had until 4 p.m. on the last day, being April 3, 2008, to deliver the waiver, or the deal would be cancelled. There was no reference to 4 p.m. in the condition.

Sexton admits he faxed his waiver to his agent at 3:30 pm on April 3, 2008 but that he then immediately changed his mind and told his agent not to send it after all, because he did not have confirmation that he had obtained his financing. The waiver was, however, faxed to the seller’s agent at 6:30 p.m. on April 3, 2008. This was not disputed.

Sexton attempted to cancel the deal the next day, saying he did not get his financing, did not intend to send the waiver and if it was sent, it was sent too late, because the banking day already ended.

Weslock then re-sold the property for $520,000 because the market turned and sued Sexton for her loss, which including carrying and other costs, which exceeded $180,000.

In a Superior Court decision Feb. 7, 2012, Judge William Hourigan determined that a banking day is no different than a regular day and ends at 11:59 p.m. If Sexton had wanted the condition to be time sensitive, such as 4 p.m., it should have said so in the condition. Therefore, the waiver sent by Sexton was in fact sent in time and he could not get out of the deal. Sexton thus had to pay the entire buyer loss of $180,000 plus $14,000 in costs. Sexton represented himself, without a lawyer.

There are many lessons to be learned from this case. Under the Real Estate and Business Brokers Act, a business day means a day that is not Saturday, Sunday or a statutory holiday. However, that is not the universally accepted definition of a business or banking day. There are also arguments as to when you start counting the days. In addition, many banks are now open on Saturdays and Sundays. You get the picture.

In my opinion, not only should the words “calendar day” should be used in any condition, it is better to pick an exact date when the condition will expire and it should also be clear that the condition is open until 11:59 on the final day, so that there is no confusion or misinterpretation. Never send in a waiver for a financing condition until you have a written signed commitment from a lender agreeing to give you your money.

Finally, understand that once a real estate deal is firm, it can be very costly to change your mind, even if it happens the very next day. Be prepared before you sign any real estate contract.